Monday, April 5, 2010

Mystery of Capital

Initial impressions?


  1. I've just hit page 100 (mid-mystery of political awareness) but I thought I'd respond with just a few thoughts.

    So far De Soto's point seems to be that a lack of capital (in the terms he defines, i.e., not just money) is the root of the Third World's problems.

    "The challenge these countries face is not whether they should produce or receive more money but whether they can understand the legal institutions and summon the political will necessary to build a property system that is easily accessible to the poor" (66). Basically, advanced countries are wasting their money throwing it into black holes of backwards economies. This is a pretty game-changing claim--if it were true, the US and other leading countries could have saved millions/billions, if only they had read this $17 book first.

    It's a pretty compelling argument so far. Obviously without a good system in which to make and hold money, people will not get wealthy. Backed by his data (how can it take 20 years (or whatever) to start a small business in Haiti?) Besides his terrible and constant similes (I can't wait to josh my buddies and say theyre higher than Sir Edmund Hillary) I just wanted to clarify a bit of the way he gathered his data. How exactly did he get these time estimates? I gathered he sent his minions around to government agencies to start an experimental business--how did that go? I wish he would tell us more about it than the paragraph or two on starting a brand new business in a foreign country. And the line, "Over the past five years, i and a hundred colleagues from six different nations have closed our books and opened our eyes-and gone out into the streets and countrysides of four continents to count how much the poorest sectors of society have saved" (11). Did they seriously go out and count the capital brick by invisibly-potentially-economically-explosive brick? All some trillion dollars of capital? (or whatever he said)

    I was waiting for him to tell me if the answer were so simple, how could these third world governments not realize the poor were sitting on almost ALL of the countries wealth and didn't do anything about it. He mentioned they took serious action...and burned down thousands of shanties. He spends the mystery of political awareness chapter talking less about why and how these governments acted the way they did and mostly rehashed the arguments from earlier in the book. I felt I could have read half as many pages and come away with the same grasp of the argument.

    It's a nice-sounding argument that's attractive in its simplicity. It sounds great cause if this is the root of all economic failures in the world hell, let's just print out some deeds, appropriate some shanty towns and get on with economic prosperity. The argument has potential but the way he's presenting it so far hasn't really compelled me in any way beyond what he said in the intro.
    I'm waiting to see how the rest of the book turns out.

  2. "The way law stays alive is by keeping in touch with social contracts pieced together among real people on the ground" (108). It seems like a large part of his argument is that law systems cannot be just thought-out and created to serve the purpose of an enlightened government, but in fact we must acquiesce to the power of illegal squatters and whatnot to make a system that fits them--almost as if we should step back and apply a system to lawlessness so that it has the superficial quality of law, rather than to find a reasonable system and form society to one that obeys the law. What is this the purpose of law if its only a by-product of how things are in a lawless state?

    "In Peru, where my team designed the program for bringing small extralegal entrepreneurs into the legal system, some 276,000 of those entrepreneus recorded their business voluntarily in new registry offices we set up to accommodate them...four years later, tax revenues from formerly extralegal businesses totaled US$1.2 billion" (154).
    Mister De Soto! Share your secrets! Apparently he and his legion created a legal system that the masses willingly engaged in, and "all [they] had to do was make sure teh costs of operating legally were below those of surviving in the extralegal sector, facilitate the paperwork for legalization, make a strong effort to communicate the advantages of the program, and then watch hundreds of thousands of entrepreneurs happily quit the underground" (155). It's that easy! Where's the explanation for what he did, because doesn't essentially solve the problem of the whole book? What are the other 200 pages for?

    Of course, when all else fails, when the greatest political minds and economic theorists fail, when faced with impossible conundrums and complicated procedures, when you don't want to "lose [your] audience" with a "drawn-out technical explanation on how to structure a bridge between the extralegal and legal sectors" (162), go to the dogs! Their barking will tell you everything!

    Dale asked whether we all just like, hated every book so far. My initial reaction/comment to this book was cautious and un-sensational. Now I can safely cast my vote in the poll--I didn't hate the book until I read the whole thing.


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